Select Committee on Environmental Audit Minutes of Evidence



Examination of witnesses (Questions 20 - 39)

WEDNESDAY 9 DECEMBER 1998

THE RT HON STEPHEN BYERS, MP and MS PATRICIA HEWITT, MP

Joan Walley

  20.  But is there not some kind of an inconsistency here? We have this Environmental Audit Select Committee, which is here to look at environmental issues—issues of sustainability right the way across Government—but it seems that by the exclusion of the Deputy Prime Minister on the Committee from the Treasury to deal with comprehensive spending, that somehow or other there is not that same cross-departmental inclusion and that he is excluded simply because as well as having responsibility for sustainability, he actually heads a spending department. There does not seem to be any consistency here.
  (Mr Byers)  I do not think that, for the simple reason that whereas the Deputy Prime Minister leads on these matters, he is not the only Minister who takes an interest in them or has a responsibility in them.

  21.  Political leadership has to come from the top downwards on this.
  (Mr Byers)  It does. It comes from the Prime Minister and the Deputy Prime Minister, and ensuring that we look very carefully at issues to do with sustainable development. I think it can be done in ways other than having people as members of a Cabinet Committee. There are many other ways that the issues, in which this Committee is concerned about, can be addressed in terms of following through from the Comprehensive Spending Review.

Mr Thomas

  22.  May I return to the Treasury's role in the context of the Comprehensive Spending Review for delivering environmental improvements. May I ask how you are going to audit the money that you have agreed will be spent by the various Government departments. May I quote to you the case of the Home Energy Efficiency Scheme, which you have mentioned, which will achieve improved warmth for households but is yet perhaps to deliver significant energy savings. How are you going to make sure that the environmental improvements that you claim are going to be delivered will actually be achieved? What is the audit trail going to be?
  (Mr Byers)  I am not wanting to give this Committee any extra work but shortly there will be published for each department their Public Service Agreements. These will specify performance targets and where they intend to spend the money; what they intend to get from the extra money they have received from the Comprehensive Spending Review. Once those Public Service Agreements are published, then there will be an opportunity for all of us—it will be done within Government through the PSX Committee, which has been referred to—but the public will know exactly what the agreement is. This is an agreement which is entered into by the Treasury on behalf of the Government with individual departments. So everybody with an interest will be able to call those departments to account. We will be able to put to them the issue you have just put to me. What are you doing in terms of the extra, the £174 million, which is going on energy efficiency? How are you spending it? Are you doing it in a way that is environmentally sustainable?

  23.  So the PSX Committee will have that specific wing to monitor its environmental impact, as well as whether value for money is being achieved?
  (Mr Byers)  We will be monitoring the Public Service Agreements, taking into account all of the issues which have been touched on by Government, one of which is sustainable development.

  24.  Will you publish the conclusions, the conclusions of the PSX Committee?
  (Mr Byers)  The actual decisions, as with all Government decisions within Cabinet Committee, remain confidential; but when we publish our White Paper on Public Service Agreements we will be making it clear there that we will want to have a system whereby we report on a regular basis, and that report will be made public on progress, against the Public Service Agreements.

Mr Loughton

  25.  Just wrapping up the generality of this Comprehensive Spending Review, you also had the luxury of not being part of the Treasury team when the CSR was put together so you can speak freely and off the record, I am sure; but do you not think it was a mistake (and if you had been the author of this document you would have done otherwise) that environmental concerns are not mentioned in any detail, even in the overview of the CSR document? Do you not think that was badly handled?
  (Mr Byers)  I do not for the simple reason that I think, as a spending Minister in the Department of Education and Employment, that the question of sustainable development was taken into account. Many of the decisions that we were taking, particularly in terms of the amount that we put into schools capital, was done on the basis that this would be supportive of the Government's general policy towards a sustainable development programme.

Chairman

  26.  Now we are talking about the Treasury, you see. It is the Treasury itself where that sustainable development would be at the core of economic policy making. Therefore, there does seem to be some gap between that statement and the fact that there is nothing in your overview of the Comprehensive Spending Review about the environment at all. Secondly, you seem to have delegated the actual consideration of these matters in departments—the overview of that anyway—to the Deputy Prime Minister. That is the gap which we are concerned about.
  (Mr Byers)  The distinction I would draw would be between having, with respect, warm words and soundbites in the overview, which is easily done—it is a few more words in the printed document—and departments not doing anything about it. What I know from my experience (and it is purely a personal experience) as a Minister of a spending department carrying through the Comprehensive Spending Review, is that we did take sustainable development into account in bringing forward our proposals. I am confident that this happened in departments across Whitehall. I happen to think that this is a far better way of doing it. It is really addressing the issue rather than just relying on words in the White Paper.

Mrs Brinton

  27.  All that may be absolutely accurate but certainly in modern day politics it is not just action, it is also words if you are going to get the message across. I am afraid if we, as an Environmental Audit Select Committee, have not been able to see the words and therefore judge the commitment, wherever does that leave the general public?
  (Mr Byers)  I am not sure how many members of the general public read White Papers and I am particularly not sure how many read the Comprehensive Spending Review. What I do know is that many people are parents at schools and when they see the tens of millions of pounds we are committing to schools capital, which is being invested in a way which is energy efficient, that will send over a far better message than a few words in a Government White Paper.

Chairman:  I think we have comprehensively covered that matter.

Mr Savidge

  28.  Prior to the conclusion of the Comprehensive Spending Review, the Chancellor said that departments would need "to root out unjustified subsidies". You say that the Comprehensive Spending Review looked in depth at the environmental impact of three areas which were listed by the Panel as being perverse subsidies: namely, financial assistance to agriculture, energy, and transport. I wonder whether you concluded that these were "unjustified subsidies" in the Chancellor's terms and, if so, what plans you had to root them out.
  (Mr Byers)  In all three areas we have looked very carefully at how we can tackle these. I would accept that in some of these areas there are unfair subsidies. As far as agriculture is concerned, as members of the Committee will know, we are not free agents. We have to operate within the Common Agricultural Policy. What we want to do—and this is part of the discussions going on around Common Agricultural Policy reform—is to ensure that we can move away from subsidies which are purely based on production, to subsidies which are far more environmentally supportive. It is one of the key objectives of this Government, in our discussions in Europe to reform Common Agricultural Policy, that we move in that particular direction. As far as energy is concerned, there are one or two taxation matters which are touched on in the Pre-Budget Report and particularly in the Marshall Report. We have already mentioned the £174 million for a revised Home Energy Efficiency Scheme. The Minister for Industry, with responsibility for these matters, announced on 24 September the fifth and largest non-fossil fuel order. As I mentioned, we are also looking at how we can progress some of the recommendations mentioned in the Marshall Report. On transport, which was the third area, the Trunk Roads Review did assess proposals against a range of criteria, including the impact on the environment. It was largely as a result of this that we did scale back the proposals contained within the previous Government's paper on this matter. So we did look very carefully at it and we came forward with some positive proposals as a result.

  29.  To root things out?
  (Mr Byers)  Yes.

  30.  Friends of the Earth, when they spoke to the Committee, drew our attention to the very substantial cost to future generations that would follow on from the nuclear energy policy. I wonder to what extent the Comprehensive Spending Review looked at the question of the hidden (or perhaps one should say) the delayed liabilities of the nuclear industry and whether you would regard that as being an unjustified subsidy.
  (Mr Byers)  I am not sure that this was a matter which was specifically addressed in the CSR process. As members of the Committee will know, it is an issue which is kept under constant review by the various Government departments who have an interest in that area.

  31.  I am not sure whether I am necessarily fully clear from that, how far you have really looked at whether it is an unjustified subsidy.
  (Mr Byers)  What I am saying is that in terms of the Comprehensive Spending Review, it was not a matter which was specifically addressed. Having said that, outside of the Comprehensive Spending Review, as most members of the Committee will know, it is an issue which is being looked at.

  32.  You said that the environmental implications of other areas were also discussed. I wonder whether you could indicate to us the nature and scope of those discussions. To take a couple of examples. First of all, the environmental impact of the requirement on the Forestry Commission to increase their rate of return on their commercial enterprises. The second example: to what extent the subsidy to the fishing industry could be seen as something which might produce environmental harm. Obviously it produces economic and social benefits.
  (Mr Byers)  On those, as far as the fishing industry is concerned, we will see in the Public Service Agreement, which is coming from the Ministry for Agriculture, Fisheries and Food, that this will address a number of issues which will touch on environmental concerns. It may be perhaps more appropriate to look in detail at their proposals there. As far as forestry is concerned, there will be a separate Public Service Agreement for the Forestry Commission. They will have their own PSA. Without giving away the details, because these will be released in the White Paper shortly, members of this Committee will be quite pleased that they do address specifically a number of environmental issues in a very positive way. It may be that you will want to talk to the Forestry Commission about the details in their PSA, but it is one of the benefits of the individual PSAs for Agencies like the Forestry Commission that they can come forward with positive proposals for performance targets which they can be judged against.

Dr Iddon

  33.  May I turn to the aims and objectives of departments, Minister. This Committee, when they looked at them, noticed that for most departments environmental issues were not included in their aims and objectives, and have been rather critical of that. In your responses this morning—and indeed in your memorandum that you put out—you thought that was each department's responsibility. Then you published the Greening Government document and in your response to that you implied that the ENV Committee were going to address the issue and that Green Ministers from those departments would think about rewording the aims and objectives. We are rather anxious that this be done. Therefore, I am asking you whether the involvement of the ENV Committee means that aims and objectives of individual departments will be rewritten. We are anxious that this should be done before the Public Service Agreements are made.
  (Mr Byers)  Work has been going on precisely in that area. When the Public Service Agreements are made public, there will be revised aims and objectives for each department, and there will be some Agencies like the Forestry Commission. Members will see that there has been a significant increase in references to sustainable development in those aims and objectives.

Mr Loughton

  34.  Minister, we were surprised to find that neither the Treasury nor the DETR have accepted that the greening of operations should be explicitly recognised alongside their own efficiency and good employment practice in the various departments' statements about how they deliver against their objectives. Also, going back to what you said earlier. In the Comprehensive Spending when it was presented, (if I remember correctly), because it is a three-year review, there was very much the condition that further lumps of money would be based on results. So one had that big stick that if the education department, the schools did not deliver the results, they would not get additional money for further improvements, capital works or whatever. Attached to that certainly would be a green condition as well. So should we interpret your view to be that the Greening Government operations is not generally a core factor in departments' activities?
  (Mr Byers)  No. I think that when members have the opportunity of seeing the revised aims and objectives, they will be able to see that departments have considered their approach to the sustainable development issues and perhaps have acknowledged that they may need to do more and certainly to reflect that in their aims and objectives. On your first point about how the Comprehensive Spending Review process will work over three years, it would be a mistake to believe that somehow departments will be penalised and punished and have money taken away from them if they fail to meet their performance targets. Effectively, most of the performance targets are to be achieved at the end of the CSR process anyway. Because they are challenging and ambitious they will need the full three years of the Comprehensive Spending Review period to be achieved. What we will be looking for in the period over the Comprehensive Spending Review is that we will be monitoring and evaluating performance, and will be suggesting ways that if there is a possibility that a department is falling behind as far as a particular target is concerned, then without giving them any extra money we will be suggesting ways in which they may be able to improve their performance so that they can reach their target at the end of that process. It is not a question of money being taken away if they fail to reach the ambitious target that we set for them, although it will clearly be a factor which the Government will want to take into account when it decides the financial allocation for the Comprehensive Spending Review 2. So that is the way in which we intend it to operate in practice.

  35.  But there is not much incentive there in the early stages for various spending departments to come up with what could be slightly costly environmental measures as part of the school building or hospital building programme, or delivery of other services. Are you really saying that you are just going to be making helpful suggestions rather than having a rather more rigid set of benchmarks to assess what we would like to see, which is an environmental benchmark included right from 6 April 1999 and running all the way through the three years, because after three years it will be too late.
  (Mr Byers)  It is a question of promoting best practice. What struck me—and I keep going back to the capital side of discussion—but if you look at areas like hospitals or schools, it is very much a question of spending to save. You are perfectly right, in the short term there will be expenditure implications. That is always the case with capital anyway. But you do get a benefit in terms of substantial revenue savings accruing either to the individual school or to the hospital. We have to convince—and maybe this is a job for the Treasury in terms of best practice and value for money—departments that in fact if they look at energy efficiency, then the revenue savings they make will, in the long run, be worth the capital costs in the short term. I certainly know within the work I did in the Education Department, we had a relatively small project which spent a few millions of pounds and we got something like 2 to 5 million in revenue savings a year. Very quickly the 13 million which we spent was repaid and so you had energy efficiency, a far better working environment, and you also had the money repaid over effectively an eight-year period. We need to have that as illustrations of good practice, to ensure that people will see that there is no conflict actually between something which is environmentally friendly, which saves energy, and the initial costs, because in the long run you actually benefit from it financially as well.

  36.  We will come on to energy efficiency. Could the energy savings be clobbered by an energy tax downstream as well, so it may be a nil gain for some?
  (Mr Byers)  That is a massive economic argument!

  37.  Touching on that subject, which is getting to the area of Climate Change and very ambitious targets which the Government has set itself, all the time you have been talking about target review yourself, and things that you want to do, so how did you consider the Climate Change programme in looking at the Comprehensive Spending Review? Did you consider setting aside any resources to deal specifically with the Climate Change programme?
  (Mr Byers)  When the Committee has a chance to see the DETR Public Service Agreements they will see the issues which are being addressed there. Certainly in terms of the capital that is being made available and the way in which it is being implemented in practice, many decisions are being made which take into account the wider objectives and the targets which are being set by the Government in relation to Climate Change.

Mr Baker

  38.  Minister, you mentioned value for money. Traditionally there has been a formula for working out value for money for individual projects. How does the Treasury now take account of externalities—that is to say, environmental impact, benefits or disbenefits, which are less easy to measure—when working out value for money?
  (Mr Byers)  They do, but it is one of those difficult areas where we have to achieve value for money. That is very important in terms of the role of the Treasury, but we have a far more flexible approach than perhaps many people realise. We did publish what we call the Green Book, as it happens, in the summer of last year, which was `Appraisal and Evaluation within Central Government'. We say there that it is very important, in terms of determining value for money, that there are costs and benefits which cannot be valued in monetary terms. That then does allow people to take into account the wider issues which do not have a pound sign upon them, so it can be a factor which is taken into account.

  39.  We were promised a Green Book for the Budget, as a matter of fact, but that did not appear. In the light of environmental necessities and sustainable development which you are committed to, may I ask whether you believe GNP is an appropriate measure to apply now when working out the value of particular measures.
  (Mr Byers)  The difficulty we have is that any fundamental change is always regarded as an attempt to change the goal posts and fiddle the figures, so we will retain the existing process and existing measures.


 
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